This paper studies how the risk of divorce affects the human capital decisions of a young couple. We consider a setting where complete specialization is optimal with no divorce risk. Couples can self ... [more ▼]

This paper studies how the risk of divorce affects the human capital decisions of a young couple. We consider a setting where complete specialization is optimal with no divorce risk. Couples can self-insure through savings which offers some protection to the uneducated spouse, but at the expense of a distortion. Alternatively, for large divorce probabilities, symmetry in education, where both spouses receive an equal amount of education, may be optimal. This eliminates the risk associated with the lack of education, but reduces the efficiency of education choices. We show that the symmetric allocation will become more attractive as the probability of divorce increases, if risk aversion is high and/or labor supply elasticity is low. However, it is only a “second-best” solution as insurance protection is achieved at the expense of an efficiency loss. Finally, we study how the (economic) use of marriage is affected by the possibility of divorce. [less ▲]

We study optimal redistributive taxes when individuals differ in two characteristics—earning ability and leisure needs—assumed to be imperfectly correlated. Individuals have private information about ... [more ▼]

We study optimal redistributive taxes when individuals differ in two characteristics—earning ability and leisure needs—assumed to be imperfectly correlated. Individuals have private information about their abilities but needs are observable. With different levels of observable needs the population can be separated into groups and needs may be used as a tag.We first assume that the social planner considers individuals should be compensated for their leisure needs and characterize the optimal redistributive policy, and the extent of compensation for needs, with tagging.We also consider an alternative social objective where individuals are deemed responsible for their needs. [less ▲]

We experimentally study how receiving information about tax compliance of others affects individuals’ occupational choices and subsequent evading decisions. In one treatment individuals receive information about the highest tax evasion rates of others in past experimental sessions with no such social information; in another treatment they receive information about the lowest tax evasion rates observed in the past sessions with no such social information. We observe an asymmetric effect of social information on tax compliance. Whereas examples of high compliance do not have any disciplining effect, we find evidence that examples of low compliance significantly increase tax evasion for certain audit probabilities. No major differences are found across countries [less ▲]

Under income-differentiated mortality, poverty measures reflect not only the “true” poverty, but, also, the interferences or noise caused by the survival process at work. Such interferences lead to the ... [more ▼]

Under income-differentiated mortality, poverty measures reflect not only the “true” poverty, but, also, the interferences or noise caused by the survival process at work. Such interferences lead to the Mortality Paradox: the worse the survival conditions of the poor are, the lower the measured poverty is. We examine several solutions to avoid that paradox. We identify conditions under which the extension, by means of a fictitious income, of lifetime income profiles of the prematurely dead neutralizes the noise due to differential mortality. Then, to account not only for the “missing” poor, but, also, for the “hidden” poverty (premature death), we use, as a fictitious income, the welfare-neutral income, making indifferent between life continuation and death. The robustness of poverty measures to the extension technique is illustrated with regional Belgian data. [less ▲]

This paper explains why workers retire earlier, and earlier at the same time as society becomes more and more indebted through increasing pay-as-you- go pension liabilities. To do so, we extend the ... [more ▼]

This paper explains why workers retire earlier, and earlier at the same time as society becomes more and more indebted through increasing pay-as-you- go pension liabilities. To do so, we extend the standard two-overlapping- generations growth model to allow for endogenous labor participation in the later period of life. We show that the rate of participation declines as the size of social security system increases. We also show that mandatory early retirement many be socially desirable in case of underaccumulation. [less ▲]